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Market Failure
Brennan, Geoffrey
Brennan, Geoffrey
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Abstract
"But as the “compared to what?” challenge implies, demonstrating market failure in relation to public goods is only half the story. What is needed to complete the account, conceived as a justification for public policy action, – is a demonstration that governments can succeed where market processes fail. And in order to deliver on that requirement, we require a fully articulated model of democratic political processes on all fours with the model of markets on the basis of which market failure is first established. Providing such a model of politics represents the original founding impulse of ‘public choice theory’ – or ‘modern political economy’ or ‘rational actor political theory’ as it has come to be called. One way of putting the conceptual point would be to claim that Pareto optimality itself should be defined by reference to a full specification of all the prevailing feasibility constraints including institutional ones. Can we really talk of market failure, when the market despite its inadequacies still generates more satisfactory outcomes than any real alternative? The need for a comparative focus is, I want to insist, entirely general – independent both of the normative framework used for assessment, and of the appropriate way of modelling politics. So whether “market failure” is conceived in terms of Pareto optimality, or distributive justice, or inadequacies in individual preferences, the same challenge remains: is there good reason to think that political processes as they actually operate are likely to improve on the performance of markets? And that question retains its force whether or not the rational choice approach is seen to be the best approach for the analysis of democratic political process. 2"(pg 2)
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2008
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With permission of the license/copyright holder